Shaun Rein: I am more of an expert on China; more North-east Asia. So, what is happening is a lot of investors feel that the markets in China are going to continue to grow because the government is trying to offset the slowdown in the economy. They are also trying to offset the high debt burden on the corporate side. And so what is happening is, by pumping liquidity into the equity markets which are soaring it is a way of being able to reduce some of the debt burden for Chinese companies. It is also a way to build up confidence in the economy. So, a lot of international investors are really focusing on China right now over India because they think that the government is going to continue to pump liquidity into the system.
Right now India is not as exciting an investment destination when we talk about hedge funds in the United States and Europe. The real name of the game is China and even more than that would be the United States where investors are reasonably bullish.
Sonia: So is it money that is moving out of India and into China or is it a lot of the local money moving from markets like Hong Kong, etc. and fresh money allocated to China? Are we losing out to the Chinese markets in your mind?
Shaun Rein: I do not think you are losing out on money. What is pumping up the Chinese markets are three areas. The first is margin trading is going up in China. So, a lot of Chinese who have been out of the markets for the last 8-10 years because the markets have been so low are coming back in. They do not want to invest in real estate in China right now. So, they are re-allocating their own personal portfolios into Chinese equities and they are able to borrow on the margin - that is big.
The second part is the Shanghai-Hong Kong Connect where the government is now allowing people from Hong Kong to invest directly into the Chinese equity markets; that is also spurring a lot of money coming from that direction.
And then the third is an opening up of an international hedge fund. People are getting more asset allocation into the Asia market and they are getting very excited. But at the end of the day, the bulk of the reason for the rise is domestic Chinese based – investors here are starting to dip their toes back into the equity markets.More in CNBC.
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